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CTL Strategies Shortlisted for asialaw Awards, Maldives Firm of the Year

CTL Strategies LLP has been selected by asialaw as one of the shortlisted candidates for Maldives Firm of the Year for the asialaw Awards 2020.

asialaw – a prominent global publication that provides comprehensive news and information regarding key decisions and developments in the asia-pacific region, and carries out a detailed ranking analysis of prominent law firms in the region – holds the annual asialaw Awards to celebrate professional excellence and expertise of leading law firms in the region. The firm is proud to be short-listed amongst several prominent domestic law firms, and amongst leading law firms operating in the Asia-Pacific region.

Recent Updates

FAQs on Service Charge

The 6th Amendment to the Employment Act now sets out rules and procedures with respect to collection and distribution of service charges. These changes were much awaited and driven by the outcry of employees of the tourism industry.

Although the Sixth Amendment provides for the general rules on the collection and distribution of service charges, several provisions of the Act, including those on service charges are very ambiguous and are left open for several possible interpretations. This lack of clarity in the Act seems to be a concern of many businesses, mostly notably of businesses in the tourism sector. The below set of frequently asked questions have been put together to better shed light on such concerns of employers with respect to service charges.

Is it now mandatory to collect service charges?

A service charge of not less than 10% is required to be collected from all services provided by businesses operating in the tourism industry. Conversely, businesses operating in industries other than the tourism industry have the discretion to collect service charges.

Are retail sales (such as boutique shop sales) subject to service charges?

The Sixth Amendment only makes it mandatory to collect service charges from the services provided by the businesses operating in the tourism industry.

However, sale of retail items which are provided separately from the services of the resort (such as boutique shop sales), and which are not generally categorised as services will not be subject to collection of service charges.

Are tourist accommodation services subject to service charge?

The Amendment stipulates that a service charge of not less than 10% must be collected from all the services provided by the businesses operating in the tourism industry.

While the Sixth Amendment does not define what would constitute a “service” that is subject to service charge, no exclusion or distinction is made for specific services provided by businesses operating in the tourism industry. Accordingly, as the law reads now, tourist accommodation services and any other service provided by businesses operating in the tourism industry should also be subject to service charge.

Does the Amendment provide how service charge should be distributed?

Service charges collected for the preceding month must be distributed before the end of the ensuing month. For example, where an employer collects service charge for the month of April 2021, that service charge should be distributed between the eligible employees before the end of May 2021.

All service charges collected by the employer must be equally distributed between all employees without discriminating between employees working in different positions or different departments.

Can employers make any deductions from the service charges collected, prior to distribution?

As is practiced now, employers are only permitted to make a maximum of 1% deduction from the total service charge collected for a month. This 1% deduction is made as an administrative charge in association with the collection and distribution of service charge.

Does the resort operator have to pay service charges to the employees of the outsourced facilities such as outsourced dive centers and boutique shops?

As per the Sixth Amendment, it is the employer who is required to collect and distribute service charges among all the employees. Employers are also required to distribute service charges collected, between all employees directly and indirectly involved in providing the services at the resort.

In the case of an employer operating a resort, the employer will only be required to distribute the service charges collected by the employer, for services provided by the employer at that specific resort. Any such service charges collected should only be distributed to the employees based at the resort and involved (directly and indirectly) in providing the services of the resort.

This in essence means that an employer would not have an obligation to distribute service charge to anyone who is not an employee or to those who work as independent contractors.

Are employees in senior management positions eligible for service charges?

Employers are required to distribute service charges equally between all employees, without discriminating between employees working in different positions. Although employees in senior management positions were excluded from the distribution of service charges when the Bill on Sixth Amendment was initially proposed to the Parliament, this exclusion was not provided for in the Act when it was passed by the Parliament.

The Sixth Amendment defines the phrase “all employees” as employees directly and indirectly involved in providing services. In effect this means, if an employee is based at the resort, service charges collected must be distributed to the employee, irrespective of the employee’s seniority in the organisation, i.e. whether the employee is a senior management employee or not.

Do employers have to include employees on probation when distributing service charges?

Sixth Amendment provides that employees on probation are also eligible to all rights stipulated under Sections 32 to 57 of the Employment Act. Provisions relating to service charges are included in Section 52 of the Employment Act. Thus, employees on probation will also be eligible to service charges in accordance with the Act.

What would happen if a resort operator collects service charges from all outlets (including outsourced facilities)?

The vital point to note is that the burden to distribute service charge collected among all their employees lies with the employer.

As such, it will be the responsibility of the employer (in case of an outsourced diving facility, the operator of the outsourced diving facility) to distribute service charges collected by such outsourced facility among the employees of the outsourced unit.

Where a resort collects service charge with respect to the outsourced facility for ease of administration, necessary arrangements should be made between the operator of the outsourced unit and the resort operator to facilitate proper distribution of the service charges collected in relation to the services provided by the outsourced unit.

Are there any record maintenance requirements relating to service charges?

Employers are required to maintain monthly records relating to service charges, including the total service charge received, amount entitled to each employee, the amount distributed and the number of employees to whom service charges were distributed.

Employers are also required to submit the aforementioned records to the Labour Relations Authority and the Maldives Inland Revenue Authority twice every year in accordance with the Regulation made by the Labour Relations Authority. Further, records relating to service charges must be maintained in a readily available form, so that such information can be communicated to the Labour Relations Authority, in accordance with any such instructions of the Labour Relations Authority.

If employers fail to distribute service charges and maintain records relating to service charges, are employers subject to any penalties?

If an employer fails to collect 10% service charge from all the services provided by the businesses operating in the tourism industry and fails to distribute service charge collected equally between all the employees, in accordance with the Amendment, such an employer may be fined for an amount not more than MVR 100,000.

If an employer fails to maintain records of service charge collected and fails to submit such records to the Labour Relations Authority and Maldives Inland Revenue Authority in accordance with the Amendment, such an employer may be fined for an amount not more than MVR 50,000.

What is the commencement date for the rules relating to service charges?

Rules relating to service charges included in the Sixth Amendment will come into effect on 1 January 2021.

We got you covered

The answers to the above questions are produced here for general information purposes only. For specific advice on your legal matters, please contact the following members of our team:

Rafa Rasheed

Associate

Mariyam Naufa

Associate

Supreme Court Judgement: Aminath Naazly v Seagate The International Pvt Ltd

 
Summary

An appeal where the Supreme Court considered when new evidence can be adduced during the appeal at the Supreme Court. The Court established the criteria that needs to be met before leave to adduce new evidence on an appeal can be granted.1

 
Factual Background

  1. Aminath Naazly and 3 others (Naazly and others) contracted with Seagate The International Private Limited (Seagate) on 5 September 2005 for the construction of a foundation and 3 floors of M. Oping Sun. The project was to be completed within 270 days.
  2. A letter was sent to Seagate on 31 January 2006 by Naazly and others for the termination of the project before full completion.
  3. The total contracting amount for the project was MVR 860,512.00, out of which MVR 699,106.00 was paid.
  4. Clause 12(b) of the contract stipulates that Naazly and others can terminate the contract after paying MVR 50,000 in damages to Seagate and Clause 16(a) of the contract provides that the possession of the building will remain with Seagate until all payments have been duly paid to the Seagate.

 
Procedural History

  1. Seagate brought an action against Naazly and others in the Civil Court claiming for the remaining MVR 161,406.00, the MVR 50,000 under Clause 12(b) of the contract and for the possession of the building.
  2. On 18 October 2009, the Civil Court held that the claim Seagate had against Naazly and others was not sufficiently established. The Court noted that the amount for the construction of the foundation was agreed by the parties under the “Drawdown Schedule”. This amount was handed over to Seagate by the Housing Development Finance Corporation (HDFC). The Civil Court held that unless otherwise proven, there is no room to suggest that the defendants owed Seagate any additional money for the construction of the foundation other than what was agreed in the Drawdown Schedule.
  3. Seagate appealed the decision at the High Court2. High Court dismissed Seagate’s claim regarding the MVR 50,000 under Clause 12(b) highlighting that Clause 12(c) allows the termination of the contract if the quality of the work was unsatisfactory.
  4. High Court also dismissed Seagate’s claims for the possession of the building. The justices of the High Court were of the opinion that Clause 16 of the agreement was crafted with the intention that it will be used after the completion of the project and since the agreement was terminated before completion, there is no reason to hand over the possession of the building to Seagate.
  5. Regarding the MVR 161,406.00, the High Court noted that according to the agreed Drawdown Schedule, Naazly and others had agreed to settle the amounts as own expenses and by a loan facility from HDFC. As there was no evidence that Naazly and others had paid such payments due as own expenses, the High Court ordered Naazly and others to pay the amounts to Seagate.
  6. Naazly appealed the High Court’s decision arguing that the High Court erred in its decision and applied to introduce new evidence that was obtained from HDFC after the High Court’s decision. The justification provided by Naazly was that the fresh evidence would have a direct influence on the decision of the Supreme Court, claiming that the evidence would make it apparent that the High Court’s decision will not stand.

 
Legal Issue

Under what circumstances will leave to adduce new evidence on an appeal at the Supreme Court be granted.

 
Holding(s)

Unanimously dismissing the appeal, the Supreme Court held that the new evidence introduced by Naazly fails to meet the criterions of:

  1. Non-availability as the document existed during the lower court process; and
  2. Credibility as the appellant failed to establish the credibility of the document despite the credibility being contested by the respondent.

Reasoning(s)

  1. The general principle is that new evidence cannot be submitted during the appeal in the Supreme Court. However, due to the importance of the new evidence and the result that may occur due to rejection of such evidence, the court may grant leave to submit the new evidence.
  2. The following criteria must be established before new evidence is to be allowed on an appeal under exceptional circumstances:
    • Non availability of the evidence during the trials in the lower court despite reasonable efforts undertaken to make it available.
    • Relevance of the evidence in influencing the substance of the decision. The evidence need not change the decision of the court.
    • There should not be any questions on the credibility of the evidence.
  3. Under the law, first instance courts are conferred with the power to conduct full trials, establish facts and decide on the application of the law. If the decision at first instance is appealed at the High Court, unless exceptional circumstances are established, the appellate court will decide the appealed case based on the evidence and defences submitted in the lower courts.3 As for introducing new evidence on appeal, Section 32(b) of the Judicature Act4 provides that new evidence can be submitted on appeal if no opportunity was given to submit them during the earlier trial.
  4. Despite the clear provisions in the Judicature Act on the circumstances in which new evidence can be submitted during an appeal at the High Court, the Act is silent on submitting new evidence on an appeal at the Supreme Court. This further reiterates the principle that introduction of new evidence is limited to exceptional circumstances. This principle has also been recently upheld at the Supreme Court in Moosa Naseer v MIRA.5
  5. The Supreme Court also noted that the Court has wide powers conferred to it by the Judicature Act. However, the application of the powers varies in degree and proportion in cases before the Court. This is evident from the hierarchy of the courts system and the jurisdiction given to each court under the Judicature Act, Further, the Judicature Act lays down the limited circumstances under which an appeal can be submitted to the Supreme Court. Hence, the circumstances on which judgments can be appealed are restricted.
  6. The Court reasoned that the purpose of the limitations on submitting new evidence during appellate stage is to ensure certainty in the first instance decisions and to find an expeditious conclusion to the dispute. The Court further highlighted that allowing new evidence during appeal would render the lower court trials ineffective and the parties may act without proper care to the lower court proceedings.
References

1 2013/SC-A/20.
2 2010/HC-A/44.
3 Section 32(a) of the Judicature Act (Law Number 22/2010).
4 Law Number 22/2010.
5 2015/SC-A/41.

 

Overview

6th Amendment to Employment Act

Blog

Tax on Pro Bono Legal Services

Insight

Moosa Naseer v MIRA